Electricity is to be generated at the small central Taranaki settlement of Ngaere.
It will be generated using gas from wells being drilled there by Canadian headquartered oil and gas company Tag Oil.
The company, which has all its operations in New Zealand, has bought a 90 per cent stake in Opunake Hydro Ltd.
The company operates a small hydro-electric power station at Opunake and sells its electricity to consumers in Taranaki and Wellington.
Tag Oil plans to use Opunake Hydro as the means of marketing electricity it generates using gas from the wells it is drilling in the Cheal field.
No details were available yesterday regarding how much electricity Tag Oil intends generating, or how much gas will be used.
However, the Taranaki Daily News understands the new facilities will be at the Cheal A production station at Ngaere.
Tag Oil's purchase of Opunake Hydro Ltd has been approved by the Overseas Investment Office, which says the "benefit to New Zealand" criteria for the deal to go ahead has been met.
Former owner Opunake Hydro Holdings Ltd - which is owned by Simon Young, the brother of New Plymouth MP Jonathan Young - is retaining a 10 per cent stake in the company.
Mr Young will continue to run the company as well.
In a statement released yesterday, Mr Young said gas would provide flexibility and security of supply for Opunake Hydro's electricity generation: "Adding gas generation to the company will give us the ability to sell renewable energy and still offer security of supply," he said.
When and how much gas generation will be added to the operation is still being finalised, but the project will create new full-time jobs, Mr Young said.
"We have been ambitious, and this deal will help us take a Taranaki business to the rest of the country."
Tag chief executive Garth Johnson said Opunake Hydro was a small but innovative company that had been looking to expand its business.
"At Tag we have been looking at options for some of the gas we produce," he said.
"We believe this deal will be positive for both companies and for Taranaki.".
This acquisition comes at the start of a very busy year for Tag.
The company is planning to spend more than $40 million on a major drilling programme.
At least 13 new wells are planned in the programme with the majority of them in the Cheal field.
- © Fairfax NZ News
What do you think of the proposed alcohol policy?Related story: Push to close bars at 2am